Currency Update - Thursday 26th March 2020
AUD
The AUD flew too close to the sun overnight after another strong
24 hour performance before selling pressures reversed all of yesterday's gains.
Global equities managed to log a strong day with the S&P 500 lifting 1.2%
while the Dow Jones closed the day up 2.4% as markets prepare for the multi
trillion dollar stimulus package from the US. Oil also posted marginal gains of
1.3% and the USD was broadly stable amid more buoyant conditions for investors.
So far the stimulus packages are working as intended and markets continue to
operate more normally for the time being. There is a slew of important data out
today which is important because it will provide more insight into the damage
that economies around the world are currently under. Keep an eye on the US initial
jobless claims set to come out this evening as this captures the week ending on
the 21st of March; the first insight into the levels of unemployment flowing
into the US amid the pandemic.
USD
The AUD managed to trade its way above 0.60 and all the way to a
high of 0.6072 before the offers begun piling up and sending us 2% lower to
where we open this morning at 0.5955. The US Dollar Index is in the red after
the announcement of the open ended Fed bond buying scheme which helped the AUD
lift however there remains significant resistance above 0.60. There is a
developing political situation in the US that could threaten current market
stability with Republican senators attempting to delay the bill to add cuts to
unemployment. Bernie Sanders has since led the charge threatening to delay the
bill with the added cuts if it doesn’t go through without those additions.
Markets are still hyper sensitive and if we do indeed see a delay to the latest
stimulus package we should expect volatility and heavy selling of risk assets.
On the data front US Durable Goods Orders for February rose by 1.2% to
beat expectations of a 0.9% decline though tempering this was weakness in the
core measure which printed at -0.6% to come in worse than expectations of a
0.4% decline. Little reaction to the data. All eyes are on the big ticket
employment data out this evening.
EUR
The AUD ran into heavy selling pressure across the board
overnight and we came off EUR highs of 0.56 to trade back down 0.5470 at time
of writing. We had a splattering of European data, with IFO German
Business Confidence printing at 86.1, below expectations of 87.7 which comes at
no surprise though currency markets didn’t take too much notice. EUR is finding
bids coming from the German Parliament who have backed a 750 billion EUR crisis
package and approved emergency powers to allow for unlimited debt. Europe
remains the epicentre of the pandemic with Spain’s death toll now overtaking
China while Italy the situation continues unabated. While the pandemic is gripping
the worst hit countries other countries in Europe and around the world are
playing close attention and doing everything they can to avoid similar fates.
GBP
AUD has enjoyed a strong run against the Pound recently however
we’ve now come off the highs and are being heavily sold as markets trade the
pair around 0.5010 at time of writing. Data wise UK Feb CPI headline came
in exactly in line with expectations, unchanged at 1.7%. The core was a little
stronger than expected at 1.7%, versus 1.5% expected and 1.6% previous. Little
reaction from markets. Tonight's Bank of England policy decision is likely to
see no change to policy, with the BoE having already cut rates to 0.1% and
announced GBP200bn of QE along with other stimulus measures.
NZD
AUD has been sent spiralling against the NZD with markets come
off a high of 1.03 to trade down at 1.018 at time of writing. We should be used
to this level of volatility by now and we can expect it to continue as markets
trade the news.